Variable Factors:

ADVERTISEMENTS:

Variable Factors refer to those factors, which can be changed in the short run. For example, raw material, casual labour, power, fuel, etc.

Variable factors vary directly with the level of output. As output increases, requirement for variable factors also rises and vice-versa. It must be noted that variable factors are not required in case of zero output.

Fixed Factors:

Fixed factors refer to those factors, which cannot be changed in the short run. For example, plant and machinery, building, land, etc.

The quantity of fixed factors remain same in the short run irrespective of level of output, i.e. they do not change, whether the level of output rises, falls or becomes zero.

Types of Production Function:

The distinction between fixed and variable factors helps us to study the two types of production function:

1. Short Run Production Function (Variable Proportion Type):

It studies the effect on output, due to change in variable input, assuming no change in other factors. As there is change in variable input only, the ratio between different inputs tends to change at different levels of output. This relationship is explained by the ‘Law of Variable Proportions’ (discussed in section 5.6).

2. Long Run Production Function (Constant Proportion Type):

It studies the effect on output, due to change in all the factor inputs. As all inputs are variable in the long run, the ratio between different inputs tends to remain the same at different levels of output. This relationship is explained by the ‘Law of Returns to Scale’.